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Ireland - RIO Country Report

RIO Country Report Ireland 2015

The annual RIO Country Report offers an analysis of the R&I system in Ireland including relevant policies and funding, with particular focus on topics critical for EU policies. The report identifies the main challenges of the Irish research and innovation system and assesses the policy response.

R&I Challenges
Increase the level of R&D activities by indigenous companies
Challenge description: 

Ireland performs relatively well in terms of innovation outputs, both in the Innovation Output Indicator and on the Innovation Union Scoreboard. This is mainly due to its economic structure, geared towards several high-tech manufacturing sectors and knowledge-intensive services.

However, research and development activity is largely carried out by foreign multinationals and there have been limited spillovers to SMEs.

Statistics published by the Central Statistics Office show that expenditure on R&D by the enterprise sector is dominated by MNCs: 400 companies accounted for 65% of total R&D expenditure in 2013.

Indigenous SMEs show also slightly lower levels of formal collaborations with HEIs compared to foreign-owned businesses (see also Challenge 3): 19% of Irish-owned R&D performing enterprises collaborate with HEIs or other institutions in Ireland and 7% with HEIs or other institutions outside Ireland, whereas these percentages are 21% and 10% respectively for foreign-owned R&D performing firms.

The evidence also points to the fact that most R&D expenditure in Irish-owned firms, 72%, is being carried out in sectors that are not significant exporters.

The background report to the 10-year enterprise and jobs strategy, Enterprise 2025 published in November 2015 notes that despite the fact that there has been an increase in the number of enterprises engaging in RD&I, the reality remains that there is a high proportion of Irish-owned enterprises across the economy that do not undertake any RD&I activities. It says that even in cases of indigenous enterprises that are engaged, the levels of investment in innovation remain low. The background report also states that progress towards targets set out in the Strategy for Science, Technology and Innovation 2006-2013 in terms of the numbers of indigenous companies with minimum and significant scale R&D expenditure was slower than envisaged.

The Enterprise 2025 background report points out that a high proportion of Irish owned enterprises are small, and the challenges facing them are similar to those found in other countries — namely the lack of capacity to innovate and to absorb innovations.

Policy Response: 

The predominance of foreign companies in the Irish business R&D landscape has been acknowledged by the Government in its Medium Term Economic Strategy document, which notes that indigenous SMEs need to improve their innovation capacity.

Enterprise 2025 outlines a range of policy responses to addressing the challenges of increasing the numbers of indigenous enterprises engaged in RD&I activities and increasing RD&I expenditures by this cohort.

The main support measure for research-performing Irish businesses is the R&D tax credit, introduced in 2004, which provides a 25% credit on corporate tax for qualifying R&D expenditure.

A wide range of direct funding schemes are provided by Enterprise Ireland (EI) and Science Foundation Ireland (SFI), especially targeting the collaborative research projects between businesses and between businesses and academia (see Challenge 3).

Demand-side measures to foster the provision to the public sector of innovative products/services by Irish SMEs have been launched with the first SBIR call in 2014 (see Challenge 4).

Policy assessment: 

Ireland took several policy measures through the years to increase the R&I capacity of indigenous firms, the most relevant in economic terms being the R&D tax credit, which has a cost in terms of foregone tax revenues estimated at €421m in 2013. However, official figures show the credit is used predominantly by multinational firms and other large employers in the high tech and manufacturing sectors

The Knowledge Development Box will be introduced in 2016 and has a similarly broad application for all types and sizes of firms.

Stakeholders have highlighted the need for State agencies to be constantly vigilant in ensuring that there are no major gaps in RD&I support funds. The Industry Research & Development Group (IRDG), a representative body for research performing organisations, recommended that the funding provided under the Innovation Voucher scheme (currently €5,000) could be extended to €20,000-50,000 so as to increase collaboration between companies and the higher education institutions. IRDG says this proposal would fill a funding gap between the current Innovation Voucher scheme and a research-based Innovation Partnership (both measures are offered by Enterprise Ireland, the enterprise development agency for Irish owned manufacturing and internationally traded service companies).

The large number of support schemes to businesses R&I should be rationalised, as also pointed out by the OECD in its 2013 Economic Survey of Ireland, which called for the consolidation of funding into a drastically smaller number of agencies, with one group dealing with science and basic research, and another with applied research and innovation. The IRDG in its submission to the Consultation Paper for Innovation 2020 noted that “companies can struggle to understand the funding structures in place for Research & Innovation across the various government bodies from Enterprise Ireland, Science Foundation Ireland, IDA Ireland, Irish Research Council, Revenue Commissioners, H2020, etc.”

The public sector funding of R&D
Challenge description: 

Ireland's R&D expenditure in the public sector as a percentage of GDP was calculated at 0.43% in 2012, which is lower than the EU average percentage of 0.75% and also below the OECD median. While Ireland has maintained public spending on research at 2010 nominal levels, this constitutes a decrease in real terms.

This concern is reinforced by looking at the declining trend of the public R&D appropriations (GBAORD), which are much lower than the pre-crisis values both in nominal values as a percentage of the total government expenditure: the latter indicator dropped from 1.27% in 2007 to 1.03% in 2013 (the provisional figure for 2014 is 1.00%). This declining trend has partially been compensated by the indirect funding provided by the tax credit on R&D performed by businesses, whose foregone revenues have been estimated at nearly €421m (see Challenge 1).  In fact, it has to be noted that Ireland cut its R&I budget at a higher pace than other expenditures, as highlighted by Prof. Reinhilde Veugelers in her recent paper 'Undercutting the future? European research spending in times of fiscal consolidation': "Most countries under high fiscal consolidation pressure cut their public R&I budgets, but some did so more forcefully than others. Ireland cut its public R&I budget by somewhat more than its overall public budget (1 percent in 2012)".

Ireland therefore faces the challenge of returning to a trend of sustained public investment in R&D.

Policy Response: 

In a context of tight public budget, Ireland efforts have been focusing on: 1) maximising the impact of public research funding; 2) getting the highest possible return from the participation of Ireland Horizon 2020.

The National Research Prioritisation Exercise (NRPS) led to the identification of the 14 Priority Areas of the National Research Prioritisation Strategy, which also serves as Ireland’s Smart Specialisation Strategy (RIS3). The NRPS aims at directing competitive Government research funding towards the 14 priority areas, which were identified on the basis of existing strengths of the public research system and the enterprise base and opportunities to deliver economic and societal impact and create jobs.

The new strategy Innovation 2020 is "committed to maintaining a focus on the impact and relevance of research for the economy and society. In fact, it states (page 9): "Between 2008 and 2013, business investment in R&D grew by 31%, while public spending fell 22%. Over this difficult period, public funding was redesigned to improve its impact (...)". Five impact indicators are mentioned:

• Increased competitiveness

• Maintaining high-value jobs

• Attracting foreign direct investment

• Developing human capital

• Ensuring a culture of evidence-based policy, processes and practices in both public and private sectors.

In accordance with the strategic document Agenda2020, Science Foundation Ireland (SFI), the main Irish public research funder, awards funding to research proposals not only according to excellence criteria, but also to the results of an ex-ante impact evaluation. SFI defines impact as the “demonstrable contribution that excellent research makes to society and the economy”, classifying the impacts of scientific research in 8 categories.

The Department of Jobs, Enterprise and Innovation has undertaken a comprehensive programme of evaluations of RD&I interventions provided by the enterprise development agencies to assess their effectiveness & efficiency in terms of exchequer funding and appropriateness to deliver on stated objectives.

The Irish Government has also developed a strategy designed to maximise Ireland’s participation in Horizon 2020. A target of €1.25b for Ireland’s drawdown of funding from Horizon 2020 was adopted. All government Departments and Agencies whose remit includes research and innovation have a role in implementing this strategy and securing the maximum benefits for Ireland. Oversight and direction setting for the implementation of the strategy is carried out on an ongoing basis by the Horizon 2020 High Level Group under the chairmanship of the Department of Jobs, Enterprise and Innovation.

Policy assessment: 

After exiting its Economic Adjustment Programme in December 2013, Ireland is still under Post-Programme Surveillance: this context does not allow a lot of margin of manoeuvre to increase public expenditure in R&D.

A first progress report on the NRPS has been released in 2014, showing the very good advancement of the strategy in terms of actions' implementation. The Department for Jobs, Enterprise and Innovation (DJEI) commissioned also an independent progress report which was published in December 2015.

Impact indicators for the research projects funded by SFI are presented in the yearly reports on the progress towards the achievement of Agenda 2020 KPIs.

An assessment of Ireland's involvement in Horizon 2020 showed that Irish participants recorded a success rate of nearly 15%, ranking 12th in the EU-28. This score is the second lowest (Slovenia being the lowest) among the countries belonging to the group of “innovation followers” in the IUS 2015.

Business-academia collaboration and knowledge transfer
Challenge description: 

The weakness of the Irish R&I system in terms of low degree of collaboration between business-academia has been recurrently highlighted in recent years. The Enterprise 2025 background report points out that despite some progress being made, there is still evidence of the considerable challenge faced in stimulating increased interaction and collaboration between SMEs and the range of research infrastructures available throughout the country.

Looking at the input side, the level of business enterprise funding of public R&D as a percentage of GDP was 0.007% in 2013 (Eurostat data), one of the lowest in the EU-28 and much lower than the EU average of 0.05% (2012). This value is even more striking if compared with innovation leaders like Germany (0.114%) or Finland (0.065%) or other strong innovators like the Netherlands (0.088%) or Belgium (0.072%).

Another figure provided by OECD shows that the percentage of HERD funded by indigenous industry has dropped from in 5.3% in 2000 to a very low 1.6% in 2013. The Survey of R&D in the Higher Education Sector 2012/2013 notes that in terms of sources of funding of expenditure on R&D by the higher education sector, Irish and foreign business provided €13m and €9m respectively in 2012, cumulatively accounting for 3.4% of total HERD.

Moreover, as already pointed out in Challenge 1, Irish indigenous companies show a lower rate of collaboration with academia compared to foreign MNC.

In terms of business-academia collaboration outputs, the level of public-private scientific co-publications per million population is also relatively low: Ireland ranks 12th in the EU with 34 publications against an EU average of 53.

Policy Response: 

Science Foundation Ireland (SFI) and Enterprise Ireland (EI) have been providing a range of funding opportunities for public-private collaborative research projects in recent years.

In particular, the SFI Research Centres programmes supports 12 research centres, involving collaboration between HEIs and over 200 companies (split approximately 50/50 between MNCs and SMEs). Government investment of €350m is matched by €190m from industry and will support the employment of approximately 1,300 researchers.

A joint Enterprise Ireland–IDA Ireland Technology Centres programme supports 15 industry-led Technology Centres, generally based in a university with support from partner universities to deliver on the research needs of enterprise.

The SFI Industry Fellowship programme awards can be granted to academic researchers wishing to spend time in industry worldwide and to individuals from industry anywhere in the world (including Ireland) wishing to spend time in an eligible Irish Research Body, while the Irish Research Council's (IRC) post-doc Enterprise Partnership Scheme, awards co-funded postgraduate scholarships and postdoctoral fellowships in partnership with private enterprises and public bodies to the most promising researchers in Ireland.

The Innovation Vouchers granted by EI provide funds (€5,000) to small companies to pay a registered knowledge provider to solve a technical or business challenge.

Finally, one major novelty has been the creation in 2013 of a central TTO called Knowledge Transfer Ireland (KTI). KTI’s mission is to deliver an efficient and productive research and technology transfer system, to make IP and expertise within public research organisations visible for companies, and to act as a central point of contact. It supports the public research organisations’ (HEIs’) research and technology transfer infrastructure and provides services complementary to already existing TTO structures.

Policy assessment: 

Irish policy makers have been actively addressing the need to improve the framework for public-private cooperation in R&D. There has now been a policy shift in the approach to the funding and orientation of research centres involving the enterprise base and the HEI/PRO sector, with an increasing leadership by industry in the centres' research agendas.

However, Ireland would benefit from the rationalisation and streamlining of the wide range of small scale grant-based schemes available for business-academia collaboration.

Finally, the regular reporting by KTI using knowledge transfer metrics and indicators (including the subjective assessment provided by businesses) will allow monitoring the progress of business-academia cooperation in Ireland in the years to come.

Development of demand-side policies and innovation procurement initiatives
Challenge description: 

Innovative public procurement has been mentioned in a number of Irish STI strategy documents over the years, but this instrument has been largely under-utilised, despite the recommendations made by the Procurement Innovation Group established in 2008 in the report “Using Public Procurement to Stimulate Innovation and SME Access to Public Contracts”.

Irish policy makers seem to have not yet exploited the potentials of using demand-side instruments such as PCP and PPI as tools to stimulate the innovation capabilities of Irish SMEs and to boost the growth of young companies in the more knowledge-intensive sectors of the economy. According to the WEF “Global Competitiveness Report 2013” Ireland ranked only 88th out of 144 countries in terms of “Government procurement of advanced tech products”.

In fact, the first "SBIR-type" (Small Business Innovation Research) calls were launched only in 2014, with a strong delay compared to other economies.

Policy Response: 

The Office of Government Procurement (OGP) was officially launched in 2013 as part of a Government drive to reduce costs and achieve better value for money through reform of public procurement. The OGP issued a Circular 10/14 (April 2014) which sets out positive measures that public sector buyers should take to promote SME involvement in public sector procurement, includes a specific provision that contracting authorities should consider new and innovative solutions, where possible and appropriate.

The first pilot project has been launched in 2014 by the Sustainable Energy Authority (SEAI) launched in collaboration with Enterprise Ireland (EI), i.e. a SBIR (Small Business Innovation Research) competition, to develop a smart technology solution for charging Electric Vehicles (EVs) in shared access parking areas.

The Action Plan for Jobs 2015 foresees (Action 63) the development of "5 additional proposals for Small Business Innovation Research (SBIR) or similar test bed actions for innovative procurement related to energy, building on the success of the SEAI/EI/SBIR for multi-user electricity charging in 2014". The action 166 is titled "Examine ways of improving the supply of innovative products and services, where appropriate, in public procurement" and includes an assessment of innovative procurement practices of other countries as potential learnings for Ireland.

A call jointly managed by SEAI and EI to develop a number of smart technology solutions in the field of Building Energy Rating (BER) data management has been launched in September 2015.

Policy assessment: 

Ireland has implemented measures on innovation procurement much later than other EU countries, also taking into consideration the strength of its high-tech and ICT sectors.

The SBIR calls launched in 2014 and 2015, together with the plan to engage in a learning process of other countries' procurement practices can be considered as positive developments.

Nevertheless, Ireland could benefit from a comprehensive strategy to boost innovation procurement.

Chapters
1. Overview of the R&I system

Ireland has been severely hit by the economic crisis, with dramatic repercussions on its public finances. This led to the agreement with EC, ECB and IMF upon an Economic Adjustment Programme which included a joint financing package of €85b covering the period 2010-2013. After successfully exiting the Programme in December 2013, the Government has sought to maintain the reform momentum to achieve the goals of creating more jobs to enhance living standards and ultimately to achieve full employment. The economic outlook looks positive, with figures for 2014 and the forecasts for 2015-2016 showing an increase in GDP, a reduction of the unemployment rate and a decrease in the debt/GDP ratio.

Thanks to the strategic sustained investment in R&D of the last decade Ireland has been able to join the top 20 countries for scientific output and scores remarkably well in a number of innovation output indicators.

The Irish R&D intensity for 2014 is 1.52%, which is below the Europe2020 target of 2.0%. The business expenditure (BERD), at €2.107m in 2014, accounts for the lion's share, overcoming the threshold of 70% of GERD. The business R&D landscape is dominated by foreign multinationals, which account for over two-thirds of the total BERD.

2. Recent developments in research and innovation policy and systems

Key developments in the R&I system in 2015 included:

  • Innovation 2020 the new five-year (2016-2020) Strategy for Research and Development, Science and Technology, was released in December 2015, following a consultation with stakeholders in early 2015;
  • The Government’s new capital investment plan, Building on Recovery: Infrastructure and Capital Investment 2016-2021 outlines an exchequer spend of €27b over the next six years. A total of €3.78b (14%) will be allocated for Enterprise and Innovation over the time-frame of the plan;
  • The introduction in the Budget 2016 of a Knowledge Development Box (KDB) scheme, operational as of January 1, 2016; will implement a competitive corporate tax rate of 6.25% (half of the corporate tax rate applicable to trading income of 12.5%) on profits arising from intellectual property assets, in accordance with OECD guidelines.
3. Public and private funding of R&I and expenditure

The crisis left its mark on the public support to R&D: the shares of both the GDP devoted to the R&D appropriations (and to a lesser extent to the GERD funded by the government) have not been preserved. In fact, a declining trend of both indicators from 2009 onwards can be seen. However, there was a considerable rise in taxes foregone by the Exchequer due to the increased use by enterprises of the R&D Tax Credit, particularly since 2008. It is not clear whether the post-crisis fiscal adjustment process has come to at the expense of the total (direct and indirect) public support to Irish R&D.

The BERD intensity of Ireland remained stable in the period 2009-2014, recording a 1.15% level in 2014. The business R&D landscape is dominated by the presence of foreign owned companies, which perform 65% of the total BERD. Moreover, the presence of a number of research-intensive multinational companies registered in Ireland which are not performing their R&D activities in the country should also be highlighted.

4. Quality of science base and priorities of the European Research Area

International data on research outputs indicate that Ireland scores higher than the EU average in a number of indicators such as publications per thousands of population, share of international co-publications, number of international publications per thousand of population, and the 10% most cited publications. However, Ireland’s share of public-private co-publications is well below the EU average.

Ireland is an active participant in Joint Programming Initiatives (JPIs) and the ESFRI processes, participating in seven of the ten JPIs. It participated in 56 of the ERANETs. In 2015, SFI entered into an agreement with Biotechnology and Biological Sciences Research Council (BBSRC), one of the seven UK Research Councils, to support research applications that cut across national boundaries involving collaborative teams led by researchers from Ireland and the UK. However, resource constraints within the PRO and higher education sectors have resulted in a small number of initiatives at a national and State agency level aimed at building international links between Irish researchers and third country researchers.

There is no specific national policy or initiative in relation to e-infrastructures, but since 2012 it has a policy statement for Open Access to publications and data. Since the launch of the policy statement the main focus of the National Steering Committee has been on its implementation and on training provision, networking and building collaboration between data holders.

 

5. Framework conditions for R&I and science-business cooperation

The framework conditions that are conducive to encouraging enterprises to invest in research and innovation are largely in place in Ireland. Business expenditure on R&D accounted for 70% of GERD in 2012.

There are a range of direct and indirect support measures available to the business sector such as the R&D tax credit scheme with a significantly growing uptake (a Knowledge Development Box scheme to be introduced in 2016), financial assistance and other supports for in-house research and for developing linkages with knowledge providers in the HES and PROs (provided by Enterprise Ireland and IDA Ireland).

One of the main difficulties facing the enterprise sector is in relation to access to finance. Though there have been a number of Government-initiated support measures to address the issue, recent studies indicate that SMEs encounter problems in accessing credit.

6. Conclusions

The four identified challenges put forward in the executive summary are summarised in the conclusions. The chapter lists relevant policy actions, assesses their appropriateness, efficiency and effectiveness, and provides links to relevant evidence based on evaluations or empirical analyses.

Geo coverage
Report year
2015
Country Report file
Official publication date
Friday, 3 June, 2016
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